Attorney’s fees under the Us Copyright Act are discretionary with the court, and not awarded as a matter of course. The last time the Supreme Court examined attorney’s fees under the Copyright Act was in 1994 in Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994) where it provided factors for the lower courts to consider and confirmed that defendants, as well as plaintiffs could seek fees as a prevailing party.

In the recent case that reached the Supreme Court, the publisher John Wiley & Sons, Inc. brought a copyright infringement action against Supap Kirtsaeng, a citizen of Thailand who studied math at Cornell University. Kirtsaeng saw an opportunity to make money when he realized that Wiley sold identical English-language textbooks in both countries, but for a much lower price in Thailand. Kirtsaeng could do the math and asked relatives to purchase the textbook in Thailand and send them to him in the United States for resale to American students, at a tidy profit.

Both the District Court and Second Circuit found in favor of Wiley. Kirtsaeng appealed to the U.S. Supreme Court, which reversed the lower courts’ decisions, determining that Kirtsaeng was protected by the Copyright Act’s “first-sale” doctrine despite the fact that the textbooks at issue had been manufactured abroad. This was a previously unsettled area of law under the Copyright Act. As a prevailing party, Kirtsaeng sought an award of more than $2 million in attorney’s fees under the Copyright Act’s fee-shifting provision, 17 U.S.C. § 505. The District Court denied Kirtsaeng’s application, holding that Wiley, although the losing party, had taken reasonable legal positions. The Second Circuit affirmed and Kirstaeng appealed to the Supreme Court.

Copyright Act Section 505:

Under Section 505 a court may award reasonable attorney’s fees to a prevailing party. While the Act provides no precise rule or formula, the Supreme Court in Fogerty identified several factors for courts to consider including frivolousness, motivation, objective unreasonableness, and the need in particular circumstances “to advance considerations of compensation and deterrence.” The Supreme Court also stated that a lower court may not award attorney’s fees as a matter of course, and may not treat prevailing plaintiffs and prevailing defendants differently.

The Supreme Court’s Decision:

Acknowledging that further guidance regarding attorney’s fees would be useful, the Supreme Court sought the proper approach in considering the propriety of fee awards under Section 505 that would best advance of the objectives of the Copyright Act—namely, enriching the general public through access to creative works by striking a balance between rewarding and protecting creators while also enabling others to make use of existing content. Wiley proposed placing substantial weight on the objective reasonableness of a losing party’s position; in contrast, Kirtsaeng proposed giving special consideration to whether a lawsuit meaningfully clarified copyright law by resolving important legal issues.

The Court agreed that Wiley’s test encourages parties with strong positions to assert their rights. Under this approach, a copyright holder whose rights have been infringed would have good reason to bring and maintain a lawsuit, even if available damages are small. Similarly, a party defending against a meritless infringement claim would be incentivized to maintain a strong defense. Conversely, applying Kirtsaeng’s test would not produce any similarly sure benefits. While perhaps advancing the public interest, Kirtsaeng’s test would not necessarily encourage parties to litigate close cases because “the hallmark of hard cases is that no party can be confident if he will win or lose,” and the potential for fee shifting raises high stakes even higher. Even where a court, after ruling on the merits is able to assess whether the losing party advanced an unreasonable claim or defense, it cannot necessarily know whether its decision will have broad legal significance. In that sense, the Court found Wiley’s approach to be “more administrable.”

The Court warned that while objective reasonableness may be an important factor in assessing fee awards, it should not be “controlling.” In other words, courts should consider all factors relevant to granting fees—for instance, a party’s litigation misconduct, or the necessity of deterring repeated instances of copyright infringement or repeated instances of overly aggressive copyright infringement claims. The Court further explained that a fee award may be appropriate even when the losing party advanced a reasonable claim or defense if, considering “all the circumstances,” a fee award would further “the Copyright Act’s essential goals.” The Supreme Court did not suggest the lower court was wrong in declining Kirtsaeng’s fee award but sent the case back for reconsideration based on its clarification that all factors should be considered.

Takeaway:

The Court’s decision offers some further guidance to lower courts assessing fee applications under the Copyright Act, which may lead to greater uniformity of lower court decisions. Specifically the Supreme Court observed that courts within the Second Circuit have come dangerously close to establishing a presumption against granting fees when a claim or defense is found to be reasonable, but warned that such an approach “goes too far.” Parties litigating in the future should expect a more nuanced and possibly complex fee award analysis, and should not presume that fees necessarily will (or will not) be awarded based solely on the reasonableness of the losing party’s position.

The House Judiciary Committee began a comprehensive review of the current Copyright Act beginning in 2013. It held 20 hearings and heard from 100 witnesses.

I testified in July 2014 at the hearing regarding copyright remedy in favor of a copyright small claim court as an alternative to federal court for claims of relatively lesser economic value. [A copy of the statement I submitted is [here]

The hearings ended earlier this year and the House Judiciary Committee invited the witnesses to return for individual meeting with the bipartisan committee staff.

On September 1, I met with Joe Keeley and David Greengrass, to discuss any updates to my testimony and other issues that affect members of DMLA and the visual arts community in general. One of the purposes is to potential changes that may needed to the Copyright Act current and relevant with the digital economy.

Issues we discussed include copyright small claims, removing the Copyright Office from the Library of Congress to provide it with more autonomy and control over its budget; orphan works; copyright registration; a pilot program for a an extended Collective licensing of images; the expansion of fair use and the use of framing images to circumvent licensing. We discussed issues and proposed solutions for nearly two hours. I focused on strengthening licensing by easier registration; a copyright small claims court for more effective copyright enforcement and stopping the expansion of fair use and framing to uses that should be licensed.

It is not clear when any proposed legislation will be taken up. It would seem that making the Copyright office a stronger agency with autonomy would be a first step, as the Copyright Office could oversee any newly formed small claims dispute resolution, or other pilot programs.

The House Judiciary Committee is currently setting up a “Listening Tour” around the country to hear the views of photographers, illustrators, graphics artists, etc. They are sending 12 representatives and 12 staffers for face-to-face conversations to discuss a variety of issues notedly small claims, fair use, and copyright modernization.

The Digital Millennium Copyright Act (DMCA) was enacted in 1998 to address in part issues created by the internet and the widespread posting of content by users. In reforming the Copyright Act in 1978, the drafters thought that this Act would serve well into the future as it was content neutral but they could not foresee the way the Internet dramatically altered the way users exchanged content online and how perfect copies of copyrighted content could be virally distributed in seconds. Internet service providers (ISPs) were concerned with strict liability and monetary damages based on content posted by users and hosted on their servers over which they could not monitor and control. Section 512 of the Copyright Act was enacted to balance the concerns of ISPs and copyright owners. Qualified ISP were granted immunity from liability if they received a proper notice of infringement and expeditiously removed the infringing content.

There has been much litigation over the years regarding various aspects of the DMCA, including whether a copyright owner is required to consider whether the use made of the uploaded content is considered a fair use and not an infringement before issuing a takedown notice. Because of the massive amount of content uploaded by users, and the difficulty to search the ever increasing number of sites, content owners, including the music industry, employ technology to crawl the internet to find unlicensed content in order to end the ISP the requisite takedown notice.

A test case was brought in 2007 by Stephanie Lenz, a mother who sued Universal Music Group after YouTube removed a 29-second video of her toddler dancing to Prince’s “Let’s Go Crazy” in response to a DMCA takedown notice submitted by Universal Music Group, Prince’s music publisher. Not surprisingly, the Electronic Frontier Foundation, a pro user group supported Lenz in bringing this test case. Dubbed the “dancing baby case,” Lenz argued that her video was protected by the doctrine of fair use and that Universal’s takedown notice violated a section of the DMCA that provides liability for knowingly making material representations because it misrepresented that the video was infringing without considering fair use . Under the DMCA, a proper takedown notice must include a statement that the owner or its agent has a “good faith belief” that the use of the copyrighted work is not authorized under the law.

The case ultimately made its way to the Ninth Circuit Court of Appeals. An appeal the court was asked to examine whether fair use was a right under copyright and an authorized use, or a defense to infringement and unauthorized. In a significant ruling to content owners and ISP’s, the court issued a bright line rule that copyright holders must consider the fair use doctrine before issuing takedown notices to remove otherwise infringing content under the DMCA. The Court’s decision makes clear that a failure to do so can open the door to nominal monetary damages and attorneys’ fees for any material misrepresentations made (or improper procedures used) in the course of pulling content from service providers like YouTube. The court explained that fair use must be treated differently than other affirmative defenses because fair use is not merely an exception to an infringement – it is one that that is expressly “authorized by law” under Section 107 of the Copyright Act.

The Ninth Circuit took great pains, however, to qualify the thrust of its ruling, suggesting that it was “mindful of the pressing crush of voluminous infringing content that copyright holders face in a digital age.” In particular, a sender must only form a “subjective good faith belief” that the use is not a fair use or not authorized under the law. The inquiry “need not be searching or intensive” and, in fact, the Court recognized the role that computer algorithms and automated programs might play in making such fair use determinations and issuing proper takedown notices. The Ninth Circuit also confirmed that the question of liability for material misrepresentations does not hinge on whether or not the use is indeed a fair use: courts are “in no position to dispute the copyright holder’s belief even if [the court] would have reached the opposite conclusion.”

As a result content owners should review their notice and takedown procedures in order to ensure that their procedures give due consideration to potential fair uses. DMLA, in watching this case over the years, revised the declaration in its DMCA notice to include reference to a fair use review: I have a good faith belief that use of the material in the manner complained of herein is not authorized by COPYRIGHT HOLDER, its licensing representatives, or the law and is not a fair use.

Even if using recognition technology to find infringing uses, someone should review the use to determine if the use is a fair use or not. As fair use is determined on a case by case basis, and in not the easiest area of the law, the determination just needs to be made in good faith. As noted by the Ninth Circuit, it is not a material misrepresentation if a court might come out differently. Fair use is a judgment call after weighing the requisite four factors. DMLA has a webinar on fair use found [here] and the Copyright Office has published an index of fair use cases [http://copyright.gov/fair-use/]

*** You can find the DMCA takedown notice on the DMLA Document Library

On September 15, 2014, Nancy Wolf, on behalf of the Digital Media Licensing Association, Inc., together with various visual arts associations (The National Press Photographers Association (“NPPA”), American Society of Media Photographers, (“ASMP”), Graphic Artists Guild (“GAG”)) who signed on to the letter, responded to the Copyright Office’s Notice of Inquiry concerning its study on the right of making available.

Congress asked the Copyright Office to study whether the United States meets its obligations under various copyright treaties that require members to provide authors certain exclusive rights, including the exclusive right to make a work available to the public and to communicate to the public, including on the internet. For those of you that are familiar with the exclusive rights a copyright owner has under US law, you will say,” but I never heard of that right!”. You would be correct. The Copyright Act under 17 U.S.C. § 106 provides an author with various exclusive rights such as the right to reproduce a work, to distribute a work publicly, to display a work publicly, to transmit or perform a work publicly and to make or authorize derivative works. But the Copyright Act has no express making a work available or communicating a work to the public right.

What the Copyright Office and others have maintained is that the making available right is implicitly included in the bundle of exclusive rights provided in 17 U.S.C. § 106. The comments submitted specifically focused on the making available right and communication to the public right in connection with displaying images on the internet.

In sum, the comments raised a concern that some courts have misinterpreted the display right in such a way that effectively swallows up visual artists’ making available right and communication to the public right online and that this interpretation is inconsistent with Congress’ intent. In particular, the comments focused on the “server test,” established by the Ninth Circuit in Perfect 10, Inc. v. Amazon, which coupled the display right with the reproduction right. A series of court decisions adopting the server test, hold that a website only infringes the display right if the copyrighted image is stored on the website’s server, and then displayed using that stored copy. Under the Copyright Act, however, the display right and reproduction right are independent and, as such, it should be irrelevant whether the one possesses or controls the physical copy from which the display or communication is made.

One of the unfortunate results of these recent decisions is that a website can circumvent the need to obtain a license to use a copyrighted image by implementing certain technological processes that enable a website to display an image without storing a copy on its server. As this technological slight-of-hand, used to circumvent licensing requirements becomes more prevalent, the loss of control by visual artists over their images increases exponentially. The comments conclude that the courts’ interpretation of the display right eviscerates visual artists’ right to make their images available online and their parallel right to prevent others from doing so. Websites can circumvent licensing which in turns is causing real economic harm to image libraries and individual creators who rely on the ability to license their works to earn a living.

The recommendations include having the Copyright Office draft guidelines regarding the interaction between the rights of communication to the public and making available, and the exclusive rights set forth in the Copyright Act. Importantly, the guidelines should clarify that each of the exclusive rights are distinct – that there can be a violation of the public right to display without also having a reproduction. The guidelines should further articulate the definition of “display” to include new technological ways of displaying images online. Lastly, if the courts’ misinterpretation of the display right for visual artists persists, the response supports Congressional action.

On May 19th, the Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer, Inc. et al., 2014 WL 2011574 (U.S. May 19, 2014), ruling that laches, an equitable doctrine barring suits after unreasonable delay, cannot be used to preclude copyright infringement claims brought within the Copyright Act’s three year statute of limitations.

On May 19th, the Supreme Court issued its decision in Petrella v. Metro-Goldwyn-Mayer, Inc. et al., 2014 WL 2011574 (U.S. May 19, 2014), ruling that laches, an equitable doctrine barring suits after unreasonable delay, cannot be used to preclude copyright infringement claims brought within the Copyright Act’s three year statute of limitations.

Background

The motion picture, Raging Bull, is based on the life of boxing champion Jake LaMotta, portraying the story of LaMotta’s boxing career. The bases of this movie was derived from a screenplay written by LaMotta and long time friend Frank Petrella, registered with the U.S. Copyright Office in 1963. LaMotta and Petrella also later registered a book and an additional screenplay, ultimately assigning the rights to all three works to Metro-Goldwyn-Mayer, Inc. (“MGM”). Shortly thereafter MGM released the movie Raging Bull in 1980, and registered a copyright in the film.

The tension arose when Petrella’s daughter, Paula Petrella, learned about her ability under the 1909 Copyright Act to renew the screenplay’s copyright after her father’s death. Paula Petrella successfully renewed the screenplay’s rights in her own name and began to contact MGM regarding MGM’s potential copyright infringement.

It wasn’t until nine years after her renewal, on January 6, 2009, that Paula Petrella filed a copyright infringement suit in the Central District of California, accusing MGM of violating and continuing to violate her copyright in the 1963 screenplay by using, producing and distributing Raging Bull, identifying the film as a derivative work of the 1963 screenplay. Because the Copyright Act has a three year statute of limitations, Petrella could seek relief only for acts of infringement occurring on or after January 6, 2006. Under the Copyright Act, each new violation is deemed to constitute a “new wrong,” which triggers a new limitations period. MGM believed that Paula Petrella’s delay in suing for so many years was unreasonable, however, and sought to have the case completely dismissed on grounds of laches.

The district court granted MGM’s motion for summary judgment, holding that all of Paula Petrella’s claims should be barred under the equitable doctrine of laches, in favor of MGM’s argument claiming Petrella’s 18-year delay in commencing suit to be unreasonable and prejudicial. On appeal, the Ninth Circuit affirmed the laches-based dismissal, emphasizing that Paula Petrella was aware of her potential claims earlier and wrongly deferred suit until the film made money.

Supreme Court’s Opinion

The Supreme Court, in an opinion written by Justice Ginsburg, overturned the Ninth Circuit, holding that laches cannot be invoked as a complete bar to Paula Petrella’s claim for damages brought within the applicable three year statute of limitations window.

At the outset, the Court held that the limitations period can be properly utilized as a period for copyright owners to defer suit until they can make a proper estimation regarding whether their claims are worth litigating. The Court emphasized that an incumbent copyright owner should not be expected to challenge each and every actionable infringement.

MGM argued that one important application of laches, applicable to this case, is to prevent the loss of useful evidence, which would be implicated by the prolonged lapse in time. Unconvinced by MGM’s argument, the Court held that such evidence should instead be taken into account during the copyright infringement analysis, whereby a copyright plaintiff bears the burden of proving infringement. Moreover, there is a reduced need for extrinsic evidence because the Copyright Office’s registration mechanism makes both the certificate and original work available. The Court found further support from Congress’ decision not to employ additional time limitations despite Congress’ awareness of potential evidentiary issues when implementing reversionary rights for author’s heirs.

Never having applied laches as a complete bar to an entire claim, the Court weighed the ramifications of permitting such a claim, and held that it would impermissibly invite courts to set time limits other than those Congress prescribed.

An alternative protection for defendants to explore in this situation, as suggested by the Court, is the doctrine of estoppel. Estoppel may serve as a protection against copyright owners who engage in intentionally misleading representations regarding their delay in suit whereby the alleged infringer detrimentally relies on the copyright owner’s deception. While estoppel does not undermine laches, if properly invoked, it may bar the copyright owner’s claims completely, eliminating all potential remedies.

Not completely ridding the application of laches as applied here, the Court ruled that when there are “extraordinary circumstances,” laches may, at the very beginning of litigation, curtail the relief equitably awarded. An example cited was Chirco v. Crosswinds Communities, Inc., a case where an allegedly infringing housing project delayed suit until the project was substantially constructed and partially occupied.

The dissent, disagreeing with the majority, argued that the majority unfairly “erases the doctrine from copyright’s lexicon,” ultimately disabling a court from apply laches in copyright infringement cases, “irrespective of the length of the plaintiff’s delay, the amount of harm that it caused, or the inequity of permitting the action to go forward.”

Takeaway

The holding of Petrella v. Metro-Goldwyn-Mayer, Inc., et al., resolves a circuit split and makes clear that laches is prohibited as an applicable defense to completely bar claims for infringement that occurred within the three year statute of limitations and that litigants may wait to determine whether the recoverable damages support the cost of a lawsuit. The Court’s analysis detailed both the ramifications of implementing the defense as a complete bar to future cases, as well as the implications of disallowing MGM to utilize the defense in this particular situation, which in the Court’s opinion, was not exceptionally damaging and would not result in “total destruction” of the film and only affecting a “fraction” of MGM’s income.

In 2004 Google entered into an agreement with a number of libraries to scan their book collections and in return provide them with digital copies of the scanned versions. Since then, Google has scanned over 20 million books and has made “snippets” of those still under copyright available to the public via search. This wholesale scanning of books resulted in a class action lawsuit brought in 2005 by The Authors Guild, and a few named authors, asserting that verbatim copying of books in their entirety by Google infringed the authors’ copyright in the books. The case was assigned to Judge Chin in the Southern District of New York. Google ‘s defense was fair use, an exception under the Copyright Act that permits certain uses of works in copyright without consent from the owners.

Initially the Authors Guild, and a group of publishers, who had also brought copyright claims against Google, and Google entered into a settlement agreement in 2008 that would create a registry and a way to monetize works as well as exploit orphan works, both from past scanning and on a going forward basis. Judge Chin refused to approve the settlement as unfair.

In 2012, Judge Chin did certify the class action, and Google appealed. The Second Circuit stayed the action and in 2013 denied class certification and directed that the issue of fair use be addressed by the district court before class certification. Judge Chin had since moved from the District Court to the Second Circuit but retained the case. The publishers were no longer in the case, and Google brought a motion to dismiss the case based on fair use; the Authors Guild moved for summary judgment as to infringement.

On November 14, 2013, eight years after first being assigned this case, Judge Chin ruled in Google’s favor finding fair use and against the Authors Guild and authors, dismissing the copyright claim in its entirety. The court listed all the benefits of the book-scanning project, including search, data mining, preservation, and making works easier to find for scholars and for users to purchase and find books. Judge Chin found that the use of the copyright works by Google served the purpose of copyright, by advancing the progress of the sciences and useful arts.

As fair use must be determined on a case by case basis, Judge Chin went through the traditional fair use analysis, weighing the four factors as outlined in Section 107 of the Copyright Act.

(1) The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2) The nature of the copyrighted work;

(3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) The effect of the use upon the potential market for or value of the copyrighted work.

Over the years, courts have placed greater emphasis on the first and fourth factors. In looking in at the first factor, the purpose and character of the use, courts ask whether the second use is transformative, even though that term does not appear in the statutory language. It derives from a 1990 Harvard Law Review article written by Judge Pierre Leval on the nature of fair use and has been instructing courts ever since. The courts looks at whether the new work merely “supersedes” or “supplants” the original creation, or whether it: “instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether to what extent the new work is “transformative.”(Quoting Leval)

According to Judge Chin “Google’s use of the copyrighted works is highly transformative. Google Books digitizes books and transforms expressive text into a comprehensive word index that helps readers, scholars, researchers, and others find books. Google Books has become an important tool for libraries and librarians and cite-checkers as it helps to identify and find books. The use of book text to facilitate search through the display of snippets is transformative.”

Judge Chin relied in part on Bill Graham Archives v. Dorling Kindersley Ltd., which held that small-size reproductions of concert posters as part of a historic timeline in a book on the history of the Grateful Dead was transformative. “The display of snippets of text for search is similar to the display of thumbnail images of photographs for search or small images of concert posters for reference to past events, as the snippets help users locate books and determine whether they may be of interest. Google Books thus uses words for a different purpose — it uses snippets of text to act as pointers directing users to a broad selection of books.

Further, Judge Chin found that the use was “transformative in the sense that it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas”.

Although Google is a for profit company which would disfavor fair use under the first factor, the fact that Google did not sell the copies to the libraries, no longer sells ads on book pages, nor sells the snippets or books, did not tip the balance against fair use on this factor.

The second factor, the nature of the work, which looks at whether the underlying work is factual and less deserving of fair use, or creative and favoring fair use, did not play a significant role in the analysis and in fact has not been given much weight by the courts. The court noted that 93% of the works were non- fiction.

The third factor, the amount and substantially of the portion used was also insignificant in the court’s analysis and only weighed slightly against fair use. Admittedly Google scanned the entire works but the court noted that full scanning was functionally necessary to provide search and that only snippets were made available of copyright works.

The fourth factor addresses market harm as a result of the unauthorized use. The Authors Guild argued that Google’s scanned works replaced the market for the books and users could obtain what they needed through numerous snippets searches of the same work. Judge Chin did not find this argument persuasive and stated “To the contrary, a reasonable fact finder could only

find that Google Books enhances the sales of books to the benefit of copyright holders. ” He noted that it would be impossible to piece together an entire book by snippets as Google’s technology prohibits it and that the search tools and links to where you can purchase books assists in making online sales of books easier.

Overall Judge Chin found that the Google Book project provided a significant benefit to the public: “It advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders.”

In addition to dismissing the direct copyright claim, it dismissed the Authors Guild claim against Google for delivering the scans to libraries, citing the previous decision in the HathiTrust case finding that the libraries use of the works to be fair use, in part by assisting the visually impaired. If the library use was fair use, Google’s use was also fair use and it could not be liable for providing them with the digital scans.

This case is a significant win for Google and a substantial broadening of the fair use doctrine. It permits a for profit company to mass digitize works without permission and reap many benefits in terms of search advantage, driving traffic to its site and the fact that it possesses the corpus, copies of 20 million books. While this decision is still a district court decision and will likely be appealed, many will rely upon the language in this decision, regarding fair use. Having all works available is certainly a benefit to society but the Copyright Act is intended to balance this benefit with incentives to creators and to offer exclusive rights for a period of time with limited exceptions. The exceptions have been expanding and this case is such an example with a balance tipping in favor of users.

Associations representing visual artists were excluded from the Authors Guild case and they, led by ASMP, have a separate class action against Google for the use of images scanned in the book project. In particular, this action was commenced when the settlement created a registry that excluded any compensation for images. PACA is one of the associations that joined the action. While there are clearly differences between the image case and the text based case (the search benefits, data mining and directing users to purchase books do not benefit visual artist in the same way), which will require a different fair use analysis, this expansive interpretation of fair use is troubling for this case as well as other matters.